Shutdown hurts Virginia the most, survey says

October 15, 2013|Ryan Murphy | rmurphy@dailypress.com | Daily Press

The economic impacts of the federal shutdown are expected to hit Virginia harder than any other state, according to a new study.

The study, conducted by the financial website WalletHub.com, tallied factors such as federal employees per capita and federal contracting dollars per capita. Virginia was the second-highest in both of those categories, and ranked fifth in number of veterans per capita.

Virginia is followed by Alaska, Alabama, the District of Columbia and Maine as the top five most-affected areas, according to the survey, which pooled federal data to create the rankings.

On Oct. 2, the Hampton Roads Planning District Commission released a report detailing the impacts on the region's economy – namely, the loss of $6.3 million per day in regional income and the furlough of 2.6 percent of the region's workforce.

The HRPDC report also cautions that a potentially worse crisis faces the nation on Oct. 17 if the U.S. debt ceiling is not increased — a default on the country's payment obligations.

Local economists said the survey's results were not a surprise. The strong military presence in Hampton Roads, which includes thousands of associated civilian workers, and the state's proximity to Washington, D.C., fuel a high degree of federal spending in the state.

Robert Archibald, economics professor and former chairman of the economics department at the College of William and Mary, said if furloughed employees aren't paid for the time they've lost since the government shut down on Oct. 1, it could spell trouble for many in the region.

"If it continues for a long time and there's less probability that you'll get back pay, it cuts much deeper," Archibald said. "People living closer to paycheck to paycheck are going to be in trouble."

He said that if the shutdown is protracted, credit card debt might begin to mount as people who aren't getting paychecks have to pay bills and buy food.

Continued uncertainty over the shutdown has already cast a long shadow over Virginia. That uncertainty grows every day that a funding deal isn't passed as the state moves into the budget and revenue-forecasting process in anticipation of the next two-year state budget.

Greg Grootendorst, the chief economist with the Hampton Roads District Planning Commission, said other sectors in the area will take hits as well, such as restaurants that typically serve many federal workers or hotels that rely on contractors and Department of Defense personnel coming to the area to work for a few weeks.

The meals and purchases that furloughed employees skip might not be made up later, even if those workers receive back pay, he said. Another important factor is the loss in productivity — days and weeks that workers can't get back.

"If you are unable to work for two weeks, that's two weeks of lost productivity, which puts you two weeks behind. There's really no way to make up that time," Grootendorst said.

Sen. Mark Warner (D-VA) expressed frustration with the shutdown's effects on Virginia during a conference call with reporters on Tuesday.

"The damage being done each day by this political circus is really unprecedented," Warner said, referring to the funding negotiations going on in Congress. "We're taking this on the chin more than any other state."